IREDA’s ₹2,150 cr IPO opens today: Should you subscribe to the PSU issue?

Ahead of the initial public offering (IPO), state-owned Indian Renewable Energy Development Agency (IREDA) has raised ₹643.26 crore from anchor investors. The ₹2,150-crore IPO of the PSU company, which is going to be the first by a government-owned entity since LIC in May last year, will open for subscription today and will close on November 23. The shares are expected to be listed on the BSE and NSE on December 4.

The power sector focused financing company allotted 20,10,19,726 equity shares to a total of 58 anchor investors at ₹32 apiece. The anchor book saw participation from 13 mutual funds, including LIC MF Large & Mid Cap Fund, DSP Equity Opportunities Fund, SBI Banking & Financial Services Fund, HDFC MF, ICICI Prudential, and others through a total of 32 schemes.

The IPO of IREDA, the largest pure-play green financing NBFC in India, is a combination of a fresh issue of 40.31 crore shares and an OFS of 26.87 crore shares by existing shareholders. The price band has been fixed at ₹30-₹32 per share for the IPO, and the lot size is 460 shares and in multiples thereof. This means, the minimum application amount for retail investors is ₹14,720 for 460 equity shares and ₹191,360 for a maximum of 5,980 shares.

Ahead of the opening of the IPO, IREDA was commanding a grey market premium (GMP) of ₹6, indicating listing to be around ₹38 (IPO price of ₹32 + today's GMP), up 18.75% over the issue price.

The company intends to use net proceeds from the fresh issue towards augmenting the company’s capital base to meet future capital requirements and onward lending.

Power sector financing NBFCs primarily focus on financing power generation, transmission, distribution, and other activities. They provide funds for various types of power projects, including thermal power plants, transmission lines and renewable energy projects such as solar power plants, wind farms, hydroelectric projects, bioenergy energy projects and clean energy generation.

Analysts view on IREDA IPO

Dilip Davda, Contributing Editor at Chittorgarh.com, says that investors may “apply” to the issue with a long term perspective. “IREDA enjoys front runner tag in renewable energy financing and advisory services and is a PSU. It has posted growth in its top and bottom lines for the reported periods. Based on annualised FY24 earnings the issue appears fully priced, but is a long race horse,” he says.

Analysts at Geojit have recommended a “Subscribe” rating on a medium- to long-term basis, citing that IREDA is well placed to capitalise on the growth in the renewable energy (RE) sectors amid consistent growth in loan books, healthy return ratios, and varied financial products.

Reliance Securities has also recommended a “Subscribe” rating, saying that IREDA has posted healthy profitability over the past couple of years, while strong growth outlook and experienced management team also augur well for the company.

BP Wealth has advised “Subscribe” rating to the issue from a medium to long-term perspective, saying that at the current P/BV multiple of 1.2x, the company is attractively valued.

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